Proceeds of Crime Bill

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Mr. Grieve: It was not put forward as a wrecking amendment. I am prepared to accept that the result of my late night drafting may be that I would wreck a portion of the Bill, but that is unintentional. Much may depend on how the Board of Inland Revenue's powers are exercised. Perhaps I am wrong, but I understood that, subject to certain periods of limitation, there would be nothing to stop the board from conducting a further inquiry if information that it did not know about came to light. The Inland Revenue, rather like the Spanish inquisition, is always lurking just around the corner if one has not got it right. My understanding is that the board's powers are unfettered in that respect, so I do not think that the hon. Gentleman is necessarily right.

Stephen Hesford: I am not a tax expert, and I did not intend to delve into this subject too deeply, but is it not true that the Inland Revenue has six years during which it may investigate each tax year?

Mr. Grieve: I am no tax expert either. Perhaps the Minister could give us that information. The Revenue may be subject to a six-year rule for civil recovery cases, but I am not aware that it is subject to any such

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limitation for criminal offences. However, that is not my subject of expertise.

Mr. Wilshire: Having run my own businesses before I became a Member of Parliament, I believe that the distinction is that although the Revenue requires people to keep records for six years, its powers to reconsider a case are not tied in with what is on the mind of the hon. Member for Wirral, West (Stephen Hesford). We may need to do our research before we can say definitively how far back the Revenue's powers can go. As far as I know, the six-year rule applies to paperwork.

Mr. Grieve: My hon. Friend is almost certainly right. Once a period has passed and one no longer has the legal obligation to keep records about an event, it is likely to be difficult for an inquiry to elucidate information about it—and it would not be wrong if one no longer had those records to show the Revenue. That may answer the question asked by the hon. Member for Wirral, West. I am not aware of a time limit beyond which the Revenue cannot bring a prosecution.

Stephen Hesford: I am not sure whether I meant criminal or revenue-collecting investigations.

Mr. Grieve: I am sure that the Minister will be able to enlighten us about that.

Mr. Tredinnick: We ought also to consider the powers of Customs and Excise, because they might have a bearing on the matter.

Mr. Grieve: My recollection is that the powers of Customs and Excise are similar, but I am not an expert on that subject.

Mr. Tredinnick: That may be the case, but is this not an issue that we ought to think about? My understanding is that the powers of Customs and Excise are even more draconian and extensive.

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The Chairman: Order. The amendment does not refer to Customs and Excise, and we have dealt with the question of the powers. I wish the hon. Member for Beaconsfield to move on and discuss his general point.

Mr. Grieve: I was bringing my remarks to a conclusion, Mr. O'Brien, when there was a series of interesting interventions.

The hon. Member for Wirral, West said that this was a wrecking amendment. He is wrong. It is intended to initiate a discussion about the relationship between the powers of the director and those of the Board of Inland Revenue. One way of doing that is to put forward an amendment that says, ''If the Inland Revenue have previously carried out an inquiry, the director should not carry out a further inquiry for the same period.'' However, one could qualify that by adding, for instance, ''unless further evidence has come to light.''

I tabled the amendment to stimulate a discussion, because the Committee should debate the matter. I understand the Government's point of view, but I have

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niggles of anxiety that we might be introducing a short-cut procedure that could result in unfairness, or a perception of unfairness. I seek reassurance that that will not happen.

With regard to part 6 and clause 311, I have a sense that we are introducing a final fallback position for the director, if he cannot get anything else to stick. That might be a good thing, but I need reassurance that it would not lead to a regime so wholly unlike that of the Board of Inland Revenue that it will bring the tax system into disrepute. That issue needs to be addressed.

Mr. Tredinnick: There is also a more general, and simple, concern. We are running the risk of introducing legislation that will allow people to be tried twice. That is a very simplistic lay person's way of expressing the concern—[Interruption.] The hon. Member for Glasgow, Pollok is breaking all the rules of the House by attempting to applaud me by clapping his hands, and I am deeply touched that he should want to do that on this jolly occasion.

A person might have to jump through two hoops, and that would go against the basic tenets of British justice. By expressing that concern, Opposition Members are not trying to wreck any part of this important Bill.

Mr. Davidson: May I describe a scenario to the hon. Gentleman? In a Scottish court, a bad person might receive a not proven verdict. I would be in favour of such bad people having to jump through hoops again. If nobody else can get them, the tax people should be able to get them.

Mr. Tredinnick: The hon. Gentleman raises another interesting point—the fact that there are different approaches in Scotland and in England. Since the Act of Union, Scotland has been able to retain its separate legal system. The Under-Secretary should focus on whether the approach and application are significantly different north and south of border, and on whether, if that is the case, that should be addressed. He shakes his head. It seems unsatisfactory that someone should, in effect, be tried twice—or, to be more technically correct, that he should have to appear before two authorities. Speaking as an Englishman who represents a midlands constituency, I do not think that that rings well. However, the hon. Member for Glasgow, Pollok has told the Committee that in Scotland, when a villain is subject to the middle judgment of not proven—which essentially means that although the accused cannot be pinned down this time, he is certainly not innocent—

Mr. Davidson: Not proven means, ''We know he did it, but we can't prove it.''

Mr. Tredinnick: Perhaps English law could learn something from Scottish law on that point. I am not sure whether the Prime Minister will find time for such a Bill during this Session, but there is a case for providing the option of such a judgment in English law.

We run the risk of introducing a measure that may be seen as unfair and unjust. I look forward to the Minister's reply.

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Mr. Ainsworth: Issues that rightly concern people have arisen from the discussion. As this is the lead clause in this part of the Bill, it may be appropriate if the debate on the amendment ranges widely, as the hon. Member for Beaconsfield said that he wanted it to. We may lose the opportunity for a clause stand part debate, but this may be the best way to discuss such issues.

Mr. Grieve: I confirm that that seems the sensible way of proceeding. Were we to have a wide-ranging debate on the amendment, I was not going to seek a clause stand part debate, although other amendments that have been tabled raise specific issues. I do not know whether that commends itself to the Committee.

Mr. Ainsworth: I think that it has commended itself to you, Mr. O'Brien, as you seem to be nodding approval. That is the most important thing.

It may be helpful if I try to expand on how the powers are intended to be used. The hon. Member for Beaconsfield said that although the Revenue clearly had powers, he perceived a potential weakness, and there was a potential need for focus. That is exactly what is needed, as the Revenue also has a massive responsibility that ranges across the whole population of the United Kingdom, and it cannot therefore be expected to focus on the need to recover the proceeds of crime for the taxation system, as the director can and will be required to do. The hon. Gentleman said that the powers were unusual, which in the context of British law, they are. However, other jurisdictions in other parts of the world have given taxation powers to agencies that have been effective in recovering the proceeds of crime.

The hon. Member for Bosworth said that he was worried about people effectively being tried twice. I accept what the hon. Member for Beaconsfield said—that he did not intend to table a wrecking amendment. It is a wrecking amendment in part, but that was not his intention, which was to prise open the issues for debate. However, I cannot understand how the hon. Member for Bosworth can argue that someone is effectively being tried twice because they are obliged to pay tax on acquisitions that they have clearly made, and on which they have clearly not paid tax in any other way. If he is saying that, I do not think that it will resonate with any of his constituents. I do not think that that was what the hon. Member for Beaconsfield was saying, or that any law-abiding taxpayer in the country will sympathise with such an argument.

Mr. Tredinnick: I am certainly not saying that we should let off offenders who have defrauded the Revenue. My point is that as the Bill stands, the offender may have to be assessed by two separate authorities for the same thing. I question whether that is necessary.

Mr. Ainsworth: Let me go through the way in which the matter will be argued. We must bear in mind that we are trying to do two things. First, we will provide focus by introducing an effective power to levy tax where tax has not been paid on criminal gain. Secondly, as the hon. Member for Beaconsfield points out, while doing that we should do the

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maximum to ensure that we do not bring the tax system into disrepute, or distort it, or change its powers or the way in which it operates. If we cannot satisfy people in that regard, there will be worries elsewhere than in the criminal fraternity about the powers that part 6 provides.

The original performance and innovation unit report on ''Recovering the Proceeds of Crime'' found that many criminal organisations generate substantial revenues that go untaxed. Those enjoying the proceeds of their criminality do so at the expense of the honest taxpayer paying his or her fair share of the tax burden. The use of taxation functions by the director against those enjoying the proceeds of crime will send a clear message that taxation is to be applied fairly and consistently to everyone.

The director will operate a hierarchy of options, as I mentioned when we debated part 2. He will consider whether criminal confiscation action is appropriate, and then whether to initiate civil recovery action. Only when those other approaches have been exhausted will the taxation functions arise. For example, the director may be satisfied that there is insufficient likelihood of the success of a civil recovery proceeding based on the available evidence, or he may decide to give priority to other civil recovery cases if he considers that action under part 6 would represent a more effective and efficient use of resources in a particular case.

Alternatively, the property may have been acquired outside the specified time limit for civil recovery proceedings to be successful. The code requires that to be six years in normal circumstances, although I am advised that in cases in which fraud is suspected, the Revenue can go back 20 years to determine whether to raise tax levies on income gained fraudulently. In such circumstances, the director will consider whether there are grounds for exercising his Revenue functions. He will not exercise his Revenue functions on the basis of referrals from the Inland Revenue. However, he will liaise with the Revenue to ensure that cases are handled in the most effective way.

The director will effectively stand in the shoes of the Board of Inland Revenue for the purposes of taxation. All the tax law that applies to the Inland Revenue will apply to the director, including its powers, such as the ability to raise tax assessments, potentially with penalties and interest, and all the safeguards and rights of protection afforded to the taxpayer. Those will apply equally to the director as to the Board of Inland Revenue. The director will apply the taxation system in the same way as the Inland Revenue, including its extra-statutory concessions. The effect of that is to try to maintain a single taxation system.

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Prepared 15 January 2002